Public undertakings in India
Public Undertakings in India
What are Public Undertakings?
Public undertakings in India are enterprises or businesses owned, controlled, or substantially financed by the government (Central or State). They are also commonly referred to as Public Sector Undertakings (PSUs) or Government Companies.
Public undertakings serve various socio-economic objectives such as:
Promoting economic development
Providing essential goods and services
Controlling natural monopolies
Creating employment opportunities
Generating revenue for the government
Types of Public Undertakings in India
Departmental Undertakings:
These are directly controlled and managed by a government department (e.g., Railways, Post & Telegraph).
Statutory Corporations:
Created by special Acts of Parliament or State legislatures, these enjoy more autonomy (e.g., Life Insurance Corporation, Reserve Bank of India).
Government Companies:
Registered under the Companies Act, 2013, where the government holds a majority stake (e.g., Bharat Heavy Electricals Limited - BHEL).
Characteristics of Public Undertakings
Majority government ownership and control
Serve public interest over profit maximization
Often enjoy monopoly or dominant position
Funded through government budget, loans, or internal accruals
Subject to audit and parliamentary oversight
Legal and Constitutional Context
Article 12 of the Constitution of India defines “State” to include government instrumentalities, which encompasses public undertakings.
Public undertakings are subject to constitutional obligations like Fundamental Rights and Directive Principles of State Policy.
The role and control of PSUs have evolved with economic liberalization, balancing autonomy and government supervision.
Important Cases on Public Undertakings in India
1. State of West Bengal v. Kesoram Industries Ltd. (1966)
Facts:
The government acquired shares in Kesoram Industries, treating it like a public undertaking. The question was whether it should be subject to government control and obligations.
Held:
The court emphasized the distinction between a purely private company and a public undertaking based on government control and ownership.
Significance:
This case clarified the concept of control in determining whether an enterprise is a public undertaking, thus attracting constitutional and administrative law scrutiny.
2. R.D. Shetty v. International Airport Authority of India (1979)
Facts:
The International Airport Authority of India (IAAI), a statutory corporation, was alleged to have acted arbitrarily against a private company.
Held:
The Supreme Court held that statutory corporations and public undertakings must act fairly and are subject to the principle of natural justice and fundamental rights.
Significance:
This case established that public undertakings are state instrumentalities under Article 12 and are bound by constitutional principles including fairness and non-arbitrariness.
3. Bangalore Water Supply and Sewerage Board v. A. Rajappa (1978)
Facts:
The Bangalore Water Supply and Sewerage Board, a government undertaking, was challenged regarding its liability under the Workmen’s Compensation Act.
Held:
The Supreme Court held that a public undertaking or a statutory corporation performing public functions is a “State” under Article 12 and liable under laws applicable to the state.
Significance:
This is a landmark case expanding the definition of the “State” under the Constitution to include public undertakings and statutory corporations.
4. S.R. Bommai v. Union of India (1994)
Facts:
Though primarily a case about federalism and dismissal of state governments, the case touched upon the role of government undertakings in governance.
Held:
The court reiterated that the actions of public undertakings are subject to judicial review and constitutional limits.
Significance:
It reinforced the principle that government bodies, including public undertakings, are accountable to the Constitution and courts.
5. Union of India v. Hindustan Development Corporation Ltd. (1965)
Facts:
The issue was regarding the authority of a public undertaking to act in commercial matters and whether it was exempt from ordinary company laws.
Held:
The Supreme Court held that government companies/public undertakings must comply with statutory regulations unless exempted, and their commercial dealings are subject to ordinary laws.
Significance:
This decision clarified the legal status and responsibilities of public undertakings, balancing autonomy and regulation.
6. Ashoka Marketing Ltd. v. Union of India (1965)
Facts:
A government corporation was alleged to have acted arbitrarily in terminating contracts.
Held:
The court ruled that government corporations must exercise power reasonably and are subject to judicial review for arbitrariness.
Significance:
Strengthened the accountability of public undertakings towards fair and reasonable exercise of their powers.
Summary Table of Cases
| Case Name | Key Issue | Held/Significance |
|---|---|---|
| State of West Bengal v. Kesoram Industries | Definition of public undertaking | Emphasized government control as key factor |
| R.D. Shetty v. IAAI | Fairness and constitutional limits | Public undertakings are state instrumentalities |
| Bangalore Water Supply Board v. Rajappa | Liability under state laws | Expanded “State” definition under Article 12 |
| S.R. Bommai v. Union of India | Judicial review of govt. actions | Govt undertakings are accountable |
| Union of India v. Hindustan Dev. Corp. | Legal status and regulation | Public undertakings subject to statutory laws |
| Ashoka Marketing Ltd. v. Union of India | Arbitrary action challenge | Public undertakings must act reasonably |
Conclusion
Public undertakings play a crucial role in India’s economic and social framework, functioning as instruments of the government for public welfare. Indian courts have developed extensive jurisprudence to regulate their powers, ensure accountability, and uphold constitutional principles.
Public undertakings are not above the law; they must comply with statutes, respect fundamental rights, and act fairly. Judicial review acts as a key check on their exercise of power.
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